Tales From LA Land: Making 225K a Year, But Can’t Afford A House

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Our link to the coast-to-coast, interactive housing overvaluation heatmap has generated interesting chatter over at Curbed LA. To wit: the story of a woman trapped and miserable in a tiny $1.1 million house, and the story of a couple making $225,000 per year who can’t afford to buy in LA.

We’ll call that comment ‘Afraid of Heights’: ‘Of course LA real estate is overvalued. My husband and I make about $225K combined and what we can afford is $650K place - what does that buy you in LA - a really (lousy) house or a 1300 sq. foot condo? Sure we can get a nicer place if we stretch ourselves or get an interest-only ARM but who wants to live like the couple Real Estate Bull described (that’s the couple trapped in the $1.1 million house)?

If we can’t afford to be anything more than renters on $225K a year, how is everyone else buying? ... it is because of all the idiotic buyers who paid those astronomical prices ($1.1 mil for a 2 bed/1bath, crazy!) with loans they can’t afford, once the ARMs reset, that got us where we are today. There better not be any sort of government bailout for these people - using my tax dollars to sustain this overvalued madness - hell no!

Read on below for the story of that $1.1 million, 2-bedroom house.

Again, this is from the comment section over at Curbed LA:

‘Nothing could possibly be wrong with real estate valuations in LA. Except ... I know this is anecdotal, but some people bought the house next door to us (1100 sq ft, 2 bd/1 ba) for $1.1 million last summer. We bought in 1998 for $375,000, FYI, and our place is 3050 sq ft with 4 bds/3 ba.

Anyway, he’s film school asst professor, and she’s an entertainment lawyer, and they just had a baby. So my wife (who just had a baby too! thanks!) is home all day, and so is our new neighbor. Naturally, they hang out a lot.

Gosh, I didn’t mean this to be such a long story. IN SHORT, the new neighbor breaks into tears a lot. Sobs and sobs and sobs. Not because of the baby. Not because of hormones or post partum, but because of real estate! She told my wife a few days ago, sobbing, that they can hardly handle their payments now, and they hate their house because it’s so goddamn small.

In short, she’s a bit emotional because they rushed into buying a house they hate and can’t afford with money they don’t have and now that prices have started to drop in our area she’s worried they’ll be stuck there forever. But that’s anecdotal. I’m sure everything in LA will be just fine, and we’ll be back up to 15% YOY appreciation any day now.’

A footnote from LA Land: The difference between reading a comment like this on a blog, and reading it in the newspaper, is significant. If you had read this in the newspaper -- in The Los Angeles Times, for instance -- you could safely assume the newspaper had verified that the comment was true -- that there is in fact a couple like this living unhappily in a $1.1 million home. On blogs, however, that’s not the case. The comment was posted, and linked, and is repeated here, without fact-checking. We don’t know if it’s true. My advice is that when you read things like this, you consider the possibility that it’s completely true, maybe a little bit of an exaggeration or, possibly, an outright fiction.